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Allow high-cost debt repayment at minimal charges: PHDCCI
Our Bureau
New Delhi
,
Nov. 19
THE PHD Chamber of Commerce and Industry today urged the RBI Governor to direct banks and financial institutions (FIs) to allow corporates retire their high-cost borrowings with minimal charges. This process will not only reduce interest burden on industry but would also increase the liquidity of banks and FIs.
The Chamber said in a statement that in the last five years many corporates have raised high-cost term loans and since interest rates have softened, corporates are keen to prepay such costly loans, but are faced with a problem of high prepayment charges.
As per the guidelines of various banks and financial institutions, though the concerned institution allows borrowers to reduce rates of interest, borrowers face difficulties on account of reluctance of banks. Presently, banks and FIs demand upfront premium as high as up to 50 per cent of differential interest benefit allowed to the concerned unit.
The rates of interest so reduced or offered to be reduced are still on the higher side in comparison to prevailing rates on funds available to industry from other institutions.
The Chamber has suggested that no premium be demanded from the borrower so that competitiveness of industry is not adversely affected in the global context. In case another institution refinances the funds of the financial institutions, the particular lender should deal with the parent financial institution on the same lines.
Furthermore, in case of running/profit making units the concessions with respect to the reduction in interest rates/prepayment incentives should be encouraged. Presently, various concessions, including the reduction/waiver in interest rates, one time settlement in respect to principal payments, are made available to the corporates accounts which have turned bad or have an non-performing asset.
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